Up-And-Comers’ Decision About Where To Sign Not So Clear Cut

Nearly every young athlete dreams of becoming a professional athlete and competing on his/her sport’s biggest stage. Baseball players want to be in the MLB, football players in the NFL, and basketball players in the NBA. Up-and-coming mixed martial artists are no exception, and for the past few years at least, the stage they dreamed of was an eight-sided cage owned by the UFC. If you’re good enough and you get the call, it’s a no-brainer, right?

Well, not anymore.

With the emergence of the UFC’s new merchandising agreement, younger fighters chasing their dream have some serious issues to look at before they sign on the dotted line with the world’s leading MMA promoter. Much has been written about the merchandising rights agreement, and most of it hasn’t been good. For a quick review, let’s recap the major points of the agreement in question.

10% of gross revenues of Zuffa produced products; 20% of gross revenues of third party products; these percentages are low compared to other professional sports

No auditing rights for fighter to determine if he is receiving correct amount owed to him

To be fair, there are advantages to signing this agreement, such as the ability to earn a steady paycheck in a world where injuries and politics can make a fighter’s financial situation unstable. That said, I feel the cons far outweigh the pros in this situation, but ultimately that’s up to the fighter to decide. If a current UFC fighter doesn’t want to sign it, he doesn’t and continues on with his career in the UFC like nothing ever happened. However, it appears to be a different story for up-and-comers trying to sign with the UFC for the first time.

That is something, apparently, the UFC is working to nip in the bud with new talent, according to one attorney, who claims Zuffa circulated the agreement to fighters before a recent UFC.

“Some of these fighters don’t have good representation with them, if any, and the UFC just buried it in their pre-fight paperwork,” said the attorney, who asked to remain anonymous. “This next Spike TV show on July 19, they’re going to try it then, too.”

And while Sherdog.com has learned that various top-tier fighters have begun to negotiate tailor-made licensing deals with Zuffa, other sources have indicated that participants on the UFC-owned Spike TV reality show The Ultimate Fighter were told to sign the merchandising agreement as a condition to appear on the latest version of the series.

There’s a lot of controversy in the MMA world regarding UFC trying to get fighters to sign merchandising agreements, which, among other things, would give UFC the right to market the wrestlers in perpetuity. The agreements are similar to those in this company (the WWE), which UFC is following the lead in when it comes to merchandising fighters. However, the situation is very different. The top fighters are balking at things like percentages offered and life-long marketing, which would include after they leave the company. In WWE, the contracts you sign to wrestle and merchandise deals are mandatory while UFC is trying to now get people under contract to sign new deals from scratch with merchandising.

They aren’t able to retroactively apply the new marketing paradigm to those under contract but those just coming in to the company are a whole other matter, and should serve as the means to implementing this closed system strategy . The merch deal will likely become a pay-to-play issue for those looking to fight in the UFC, a mandatory step for entry into the biggest MMA company in the world. There will be a mix of merch-contracted fighters vs non-contracted fighters for the foreseeable future, but over time that will increasingly tilt towards an all merch-contracted labor force for the UFC. The time frame for such a conversion is probably over a 5 to 7 year time period.

In short, for a fighter trying to break into the big-time, it appears the UFC is trying to make their promotional (fighting) contract contingent upon signing the merchandising agreement. Assuming that is the case, all things being equal, the fighter’s decision about who to sign with is suddenly not so simple.

The problem lies with the perpetuity clause. The only way that stipulation could possibly be in the fighter’s best interest, is if one assumed that the UFC will continue to dominate the marketplace indefinitely, and even that’s a stretch. Despite what anybody says, no one can guarantee that will be the case. As far as I know, crystal balls are just a myth and psychics are a fraud. If the past 15 years of mixed martial arts has taught us anything, it’s that anything can happen and happen fast. PRIDE was on top of the world one day, and the next they were gone. The UFC was one last desperate attempt away from folding for good, and became a success nearly overnight. Don’t think they can’t fall as fast as they rose. As long as the UFC is making tons of money, there will be people trying to knock it off its pedestal, and more than likely the casual fan will eventually catch on that MMA doesn’t equal the UFC.

For argument’s sake, let’s assume that five years from now that the MMA landscape has completely changed. Using today’s aspiring competitors as examples, let’s say that Affliction and EliteXC has gained a ton of traction on the UFC, ESPN covers MMA as a mainstream sport giving equal coverage to all three promotions, and the market shares break out roughly equal. In this landscape, free agency would be rampant. Now, let’s say “John Smith” signed with the UFC five years ago. Since entering the UFC, he stormed through his division, became a big star, fulfilled his UFC contract, and now has major offers from Affliction and EliteXC. Oh, and Nike wants to sign him to an exclusive sponsorship deal worth $10 million. In this situation, if Smith signs with EliteXC or Affliction, the UFC is likely going to stop promoting all the products with his likeness on them that earned him all those checks earlier in his career. Since the UFC still owns his rights, the organization may severely hinder his ability to gain new endorsement deals. The real kicker? No Nike deal since Smith doesn’t have his exclusive rights to give.

While that scenario isn’t going to play out for most fighters, it represents many of the issues younger fighters could face down the road. If I’m a fighter faced with that decision, I’m taking my chances with one of the aspiring competitors. If I do well and make a name for myself, it won’t matter if the promotion succeeds or fails. If the organization emerges as a legitimate competitor, I’m doing just as well as a comparable fighter in the UFC, but actually own my rights. If the promotion fails and it becomes crystal clear that the UFC is the NFL of MMA, the UFC is still going to want me, and I will likely be able to enter a deal with more favorable terms. And if I fail as a fighter, it’s not going to matter who I started out with. No promotion is going to sign me. How can I lose?

In the end, what’s most important is that fighters, especially ones without representation, understand what they are getting themselves into. If they understand the situation and still decide to sign the UFC’s agreement, then that is their decision to live with. The fighters who don’t understand it or have representation that is either incompetent or self-serving are the ones I worry about.

By all means, if you have a chance to be in the UFC and you don’t have to sign the merchandising agreement, go for it. But if you do, it’s a whole different ballgame. Know what you’re getting into.